With $150 million in Series A funding, Farcaster becomes a unicorn. Why are VCs optimistic about it?

Written by: 0xjs@黄金财经

The latest financing of decentralized social media Farcaster has finally come to an end.

At the end of January 2024, the decentralized social protocol Farcaster released a new feature, Frames, which attracted the attention of the crypto community.

Starting in February, a large number of users poured into Farcaster.

Farcaster's new feature Frames and the influx of new users have attracted the attention of crypto VCs. Just one month later, in March, there were market rumors that Paradigm would lead a new round of financing for Farcaster at a valuation of $1 billion.

On May 21, 2024, the previous market rumors were settled. Farcaster announced the completion of a $150 million Series A financing, led by Paradigm, with participation from a16z crypto, Haun, USV, Variant, Standard Crypto, etc. After the completion of the financing, Farcaster's valuation reached $1 billion, making it one of the unicorn startups.

As of now, Farcaster has a total of 380,000 users and more than 1.24 million posts per day.

Why are these well-known crypto VCs so optimistic about Farcaster? Let's take a look at their (Paradigm, a16z, USV, Variant Fund) reasons.

Paradigm: Excited about the future of Frames, personally developed the Frames toolkit 

On January 28, just one day after the release of Farcaster Frames, Paradigm expressed its excitement about the future of Frames on its official website and personally developed the Frames toolkit Frog.

Paradigm said that Farcaster is a social network similar to Twitter. Frames converts any Cast (post) into an embedded interactive application in the Farcaster client (such as Warpcast), redefining the way to view, participate in and share content on social media. This is the beginning of a new meta-paradigm of "interactive social rich objects" that form embedded social user interfaces, and also requires first-class abstractions to enable developers to build high-quality, lightweight and high-performance frameworks.

Frog released by Paradigm is a toolkit for building Frames on Farcaster, enabling developers to build high-quality, high-performance and lightweight Frames with only a few code blocks.  

a16z: Frames is not only decentralized social networking, but also a new primitive for the entire network

a16z partner and head of a16zcrypro Chris Dixon joined Farcaster two years ago and currently has more than 120,000 followers on Farcaster.

Moreover,a16z created a document "awesome-farcaster" on github as early as October 2023 (https://github.com/a16z/awesome-farcaster) that collects Farcaster resources.

Soon after Frames was launched, a16zcrypto published an article expressing its extreme optimism for Farcaster and Frames on it. a16zcrypto said that Frames on Farcaster is not only a decentralized social network, but also a new primitive for the entire network. Frames goes beyond previous web2 attempts at open graphs and "embedding" (such as Facebook). It is a simple way to introduce interactivity into posts - turning posts into various applications. For web3, the importance of Frames lies in their cross-client (i.e. interoperability): since the logic of Frame is distributed between the Farcaster protocol and the server running Frame, they are completely independent of any one client (such as Warpcast). For developers, this means you can create a consistent experience shared across the entire network. For users, this makes it possible to "implement a real and universal graph of user actions in consumer applications."

At the same time, most of the a16z crypto engineering team have settled in Farcaster.

USV: Social networks are being rebuilt on the chain, and Farcaster will play a fundamental role

After the Farcaster financing news was released on May 21, 2024, USV published an article on its official website to disclose the logic of its investment in Farcaster.

In 20027, USV invested in Twitter and Zynga. Both companies taught us valuable lessons.

Twitter showed how open social networks could change the way people freely share information around the world, and highlighted how a thriving developer ecosystem could help new networks scale in novel ways. Now, everything from account access to developer APIs, content moderation policies, and information flow algorithms are completely controlled by one person at one company. This is not an ideal ending for the global information network.

On the other hand, Zynga experienced the opportunities and risks of building a business on a growing social platform. They built a thriving business on the Facebook network and made important contributions to Facebook's early revenue. But ultimately, Zynga relied on Facebook more than Facebook relied on Zynga, and they found their ability to scale was limited to the point where they had to rebuild their business elsewhere.

These experiences all highlight the limitations of building social platforms under the Web2 model. In response to these and similar events, USV co-founder Fred Wilson famously said, "Don't be Google's dog, don't be Facebook's dog, don't be Twitter's dog. Be your own master." USV has held this view ever since. Fast forward nearly 15 years later, and social networking is being rebuilt "on-chain" based on an entirely new internet architecture. May 21, 2024 USV is excited to announce its investment in Farcaster, a social networking protocol that fundamentally improves on previous designs, with the only limit being our collective imagination.

Farcaster is an open protocol, just like SMTP or HTTP, users can pay and own their username forever, and all data (i.e. posts/broadcasts, following, likes, etc.) is stored in the decentralized Farcaster Hubs network. Network users always own their digital identity, content, social graph, and relationship with their audience.

Because the foundation of Farcaster is completely open, developers can build anything on it. The Farcaster team has built their own client Warpcast, but there are many others. While Warpcast looks like Twitter and Reddit today, it is also possible to build something that looks like TikTok, YouTube, and new things we can't imagine, all based on the same underlying protocol. An application ecosystem is growing rapidly, including things like news readers, search tools, bookmarking services, developer tools, robots, etc. in addition to clients and larger applications.

Importantly, every identity on Farcaster is also a crypto wallet, which means that economic activity is a first-class citizen in the system. This opens the door not only to peer-to-peer transactions like payments and tipping, but also to any economic activity related to on-chain assets and content, such as NFT minting, royalties, content subscriptions, and referral rewards. This built-in economic structure enables new business models for developers, content creators, and the protocol itself.

We believe in an internet where developers can innovate without permission, where applications are interoperable, and where protocols can be combined like Lego blocks. We should directly own our digital identities and content, and be able to move our audience from one application to another. We should be able to explore new business models with powerful built-in economic components. Our online speech, business, and social lives should not be controlled by a single company.

Farcaster was founded by Dan Romero and Varun Srinivasan, two entrepreneurs who worked at Coinbase for many years. They are students of the consumer internet and social networking, and are determined to do this experiment again, but this time decentralized, open, and leveraging strong cryptoeconomic primitives.

The social stack is about to be rewritten, and Farcaster plays a foundational role in this new and important chapter. USV is proud to support Dan, Varun, and the FC team in writing it on-chain.

Variant Fund: The Farcaster community is known for high quality and low noise

The Farcaster community is like a microcosm of the early crypto community that Variant co-founder Jesse participated in about a decade ago: optimistic, technical, ambitious, collaborative, and always online.  

For the average everyday user, Farcaster is a fledgling but rapidly growing protocol for building a "sufficiently decentralized social network." The community is known for its high quality and low noise relative to traditional social media. This is a direct result of the core team's extreme efforts to cultivate a carefully curated social graph one person at a time. And the sweat of the earliest enthusiasts who kept the network active for many years until the large influx of people recently.  

For technologists, the promise of Farcaster is a new distribution channel with permissionless building blocks that can realize the potential of crypto that many of us came here to seek: permissionless identity, money, and data.

• Identity: Every identity in the network is associated with a crypto wallet. Every post, message, and click on the network is signed and tagged with an associated FID. This is powerful because it means all interactions are authenticated in a self-sovereign manner. For users, history can be verified. Developers can also reach users directly and permissionlessly build a holistic view of their profile, not only on Farcaster, but also on-chain.  

• Money: Because every Farcaster account has an associated wallet, the network itself has the ability to receive and send payments, unlocking capabilities such as tipping, minting, crowdfunding, creating assets, and more. The result is a significant reduction in transaction friction.  

• Data: All social data on Farcaster is stored on a distributed hub network. The goal of the Farcaster Protocol is to incentivize decentralized data storage, giving users and developers confidence that they won’t be obsoleted by the platform. The impact is twofold: trust attracts quality developers to the ecosystem, and enduring openness means businesses built around the network can build richer experiences than their web2 counterparts.  

One notable example of the power of these building blocks is community tokens, which have emerged by leveraging the network’s open social graph and interconnected wallets, allowing users to tip and earn.  

Frames are another notable example. Interactive mini-apps that live as posts in social feeds but can also be displayed in any app embedded with a wallet, Frames enable developers to meet users where their wallets are. Frames can verify the identity of interacting users, can facilitate payments, and provide the ability to leverage users’ on-chain and social data to unlock additional in-Frame functionality. We’ve seen all sorts of interesting Frames, such as embedded storefronts, minting platforms, mini-games, and payment interfaces. We even built a Frame Botto to help the community learn about another portfolio project, which has since begun using Frames as a distribution channel and conducting large auctions through the network.

To date, ~400,000 users have joined the network, most of them in testing by Warpcast, the first client on top of the protocol. The development of channels as a Warpcast feature has created a unique, Reddit-like feel to finding deeper communities within the network.

At the protocol level, significant progress has enabled the network to evolve from permissioned to permissionless. The network’s core functionality — including Frames, cast actions, and Channels (soon) — continues to be progressively decentralized, allowing an early ecosystem of more clients to emerge.

The Variant team is having a lot of fun participating in the network as both a user and a builder. The various members of our team’s mod channels (e.g. / 0to1, / soundscapes, and / countrymusic) and the Frames hackathons we host in our office have a rare, frenetic energy that’s often characteristic of the most exciting new scenes. We’re also supporting teams like Nook, Kiosk, and Farworld Labs, helping to grow the pie and expand the diversity of clients on the network. Supporting early teams goes hand in hand with supporting Farcaster: protocols succeed when third-party businesses can sustainably build on top of them. The more teams that are committed to attracting new users, the better.

This brings us to the team at Merkle, the company behind Warpcast and core contributors to the Farcaster protocol. Building and maintaining both a killer product and a complex decentralized protocol isn’t easy, but doing both is often the best way to launch. Dan and Varun have built one of the fastest, highest quality technical teams in crypto. And they’re growing.  

For all of these reasons, Variant invested in Farcaster’s Series A round alongside other new investors Paradigm, USV, and Haun. While we’re focused on early-stage crypto, we occasionally bend our rules when there’s a benefit. In the case of Farcaster, the core team, early developer ecosystem, and user base represent the best of what crypto can be in terms of capabilities, attitudes, and ambitions, and we’re excited to be involved and continue to contribute to the project to help grow the Farcaster network.